Hong Kong's housing market heads into Christmas with plenty to cheer about as prices and deals continue their steady year-long rise. But opinions about what may lie ahead after the festive season is over are mixed.
One veteran analyst warned of a possible rerun of the property bubble and its implosion in 1997, though others are more sanguine about the future.
Limited land releases in the past few years meant home supply in the pipeline for the next three years was down to just 12,000 units per annum, warned UBS joint head of Asia property research Eric Wong.
This compared with up to 20,000 to 25,000 new housing units coming on stream every year over the past decade.
'If the government does not review its land supply policy, we are headed for a severe shortage of supply,' he said.
This shortage could push prices to unsustainable levels and eventually lead to a possible repeat of the property bubble and its collapse seen in 1997.
To avoid that, the government should lower its reserve price on application lists of properties available for development, allowing more residential sites to be sold, Mr Wong said.
Under the present application list system, a developer can trigger an auction by making a bid that is at least 80 per cent of a site's reserve price. Most land has been sold using the application list system since January 2004, which the government says is in line with its policy of letting the market determine land supply.
Since then, the government has been facing pressure from developers to resume land sales on a regular basis, which was suspended in November 2002.
'Developers have experienced 13 failed attempts to trigger an auction of the site in Fat Kwong Street, Ho Man Tin,' said Mr Wong, who argued that this indicated the government's reserve price was far higher than the value attached to the site by developers.
'The Housing Bureau at present focuses only on how to maximise land sales revenue. It should also [take an] overview of the land supply situation.'
The government has sold eight sites so far this financial year, reaping HK$26.4 billion.
Hong Kong Property chief executive Fredy Wu Yat-fat also urged the government to increase the land supply to avoid a potential shortfall of flats.
With a booming property market, he expected developers to be more aggressive in bidding for sites. He expected five more sites would be sold in the next three to four months, bringing revenues from auction sales to HK$40 billion.
However, Nicholas Brooke, chairman of Professional Property Services, believed the government would rethink its land policy, leading to a significant increase in the supply of residential sites, and he did not expect to see a property bubble forming in the market in the near future.
Underlying fundamentals had improved from 10 years ago, he said. Homebuyers were buoyed by money made on the stock market and had also enjoyed pay rises.
Also, unlike the run-up to the bursting of the 1997 property bubble, most buyers now in the market were end-users, rather than speculators.
Mr Brooke expected prices in the mass housing market to grow a further 20 per cent next year, while luxury homes could see price gains of up to 40 per cent.
Bear Sterns analyst Adrian Ngan Wai-hung, who anticipates a 30 per cent growth in overall housing prices next year, said affordability levels remained in the comfort zone of buyers, and rents were growing in line with the rise in prices. He therefore did not see a bubble forming.
A spokesman for the Lands Department said meetings were held with property developers from time to time to take the pulse of market needs and review land application lists every year.